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Law360 (December 7, 2020, 8:59 PM EST ) A personal protective equipment distributor sued another distributor in Florida federal court on Sunday claiming only a fraction of the 1 million medical gowns promised in a $3.3 million contract were delivered.
In a suit filed in the Southern District of Florida, Cedarwood Capital LLC says USA Capital Fund LLC lied about its ability to provide 1 million Level 4 isolation gowns that are used in hospitals and other medical settings.
Cedarwood says USA Capital delivered just 422,000 gowns, all of which were Level 3, which Cedarwood says are "almost worthless" because only one smaller-volume client would accept those gowns.
"Instead of apologizing for failing to perform, defendant demanded that plaintiff pay the second $1.65 million installment … and unfoundedly accused plaintiff of theft in an effort to deflect from defendant's own contractual breach and deceptive and unfair trade practices," Cedarwood said.
The deal for 1 million gowns at $3.30 each was signed in April, as medical providers scrambled to secure PPE for their staff amid the COVID-19 pandemic. Cedarwood says the deal was for Level 4 gowns manufactured by Shandong Rientech Medical Technology Co. Ltd. that would be delivered within five to seven business days after Cedarwood wired the initial payment of $1.65 million.
That payment was wired in two installments on April 27-28, according to the suit. But the shipment was delayed, and on May 14, Cedarwood received the 422,000 gowns, none of which were manufactured by Shandong Rientech.
USA Capital continually refused to provide documentation showing at what protection level the gowns had been certified, which meant Cedarwood could not attempt to resell the gowns, according to the suit. That certification was finally provided on Sept. 2 showing that they were Level 3 gowns, according to the complaint.
Cedarwood claims it lost $3.6 million in the deal: the unrefunded $1.65 million initial payment, plus warehousing and palletizing costs and $1.95 million in lost profits. The company is claiming breach of contract and violation of the Florida Deceptive and Unfair Trade Practices Act.
Mason Kerns, who represents Cedarwood, said the incident is part of a "scourge of unscrupulous acts" in the PPE industry.
"Actors such as USA Capital, through use of deceptive and unfair trade practices, are making it much harder for honest brokers such as Cedarwood Capital to get much-needed gowns, masks and other equipment to our healthcare heroes," Kerns said. "We are hopeful our lawsuit will not only recoup losses sustained by Cedarwood, but strike fear in those, like USA Capital, whose bald desire to profit from the pandemic has adverse and dire consequences for hospitals and other entities."
A representative for USA Capital could not be reached for comment.
Cedarwood is represented by Mason Kerns and Jeremy H. Block of Mason Kerns Law.
Counsel information for USA Capital was unavailable.
The case is Cedarwood Capital LLC v. USA Capital Fund LLC, case number 1:20-cv-24976, in the U.S. District Court for the Southern District of Florida.
--Editing by Ellen Johnson.
Update: This story has been updated to add comment from Cedarwood's counsel.
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